Special Ep. - Unilateral green rules and voluntary standards

In this special edition of Current Accounts, the Hinrich Foundation’s podcast on global trade, Patrícia Vasconcellos from the US Association of Foreign Press Correspondents interviews Hinrich Foundation Research Grant recipient Rodrigo Fagundes Cezar about the impact of unilateral green rules and voluntary standards on Brazil’s green transition.

Amid efforts to promote sustainability through trade, import policies have taken centerstage. The European Union (EU), for example, has unilaterally launched the Renewable Energy Directive (RED) and the EU Deforestation Regulation (EUDR) to help the single market achieve its ambitious climate goals by 2030. As a result, several countries have established or plan to adopt private standards and certifications, such as Brazil's sugar agency Bonsucro, to ensure compliance with these new regulations.

In Brazil, however, the results of adopting these voluntary standards have been mixed. While the country’s exports of sugar and ethanol to Europe have generally increased, these gains are often limited to municipalities with established trade ties with the EU. On the other hand, areas with fewer prior trade ties have seen declining exports. Furthermore, compliance with these standards may inadvertently lead to land concentration, favoring larger agricultural units and potentially exacerbating land inequality within Brazil.

This special episode delves into the findings of a report titled ‘Unilateral green rules and voluntary standards: A balancing act for Brazil’, commissioned under the Hinrich Foundation Research Grant, which supports up-and-coming academics. Rodrigo Cezar and his team analyze the impact of these voluntary standards on Brazil’s sugar and ethanol exports and land concentration. They also discuss the heterogeneous effect and history of trade across Brazilian municipalities. The research highlights the role of policymakers in developed nations can mitigate adverse spillover effects to achieve their sustainability goals.

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Here is an excerpt from their conversation: 

Patrícia Vasconcellos: At the end of this research in which you explore the socioeconomics, spillovers of private sugar certification that complements an EU unilateral trade policy, you already spoke about this, what have you found about the socioeconomic spillovers?

Rodrigo Fagundes Cezar: Our findings are mainly on three fronts, exports, land concentration, and gender inclusivity. These three fronts that are under constant development. But what we have so far are three findings. First, this connection between private and binding trade and sustainability requirements, which is precisely what the work that we’re talking about deals with. It has heterogeneous effects. What does that mean? It helps increase, on average, the exports. Some people might say that this is not a form of disguised protection because it actually increases exports to the European Union. However, there is a nuance in here, meaning that the positive results are centered on the cities that are the most productive cities, which are also the ones that have the largest players, Cargill and those guys. If you take the municipalities that traditionally export less to the European Union, when they get the certification to comply with the biofuel laws from the European Union, they export even less. They either stop exporting to the European Union at all and export to other countries, or they sell their production to traders so that those traders can export to the European Union.

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